Premium and discount — the expensive and cheap halves of a range

In plain words

If something traded between 100 and 200 yesterday and today, 190 feels “expensive” and 110 feels “cheap”. The middle, 150, is the reference.

Charts work the same way. Take the recent high and low as one range and split it in half.

• The middle line — equilibrium (50%)
• Above equilibrium — premium (the expensive side)
• Below equilibrium — discount (the cheap side)

Seeing which side of its range price is on right now — that is premium and discount.

The concept

Define the range first

The top and bottom of the range come from the swing structure in part 2: the last swing high and low, and the highest and lowest prices since then. The strong/weak high and low from part 2 are exactly the two ends of the range.

Why split it in half?

Big players need to buy a lot, so they want to buy cheap; they need to sell a lot, so they want to sell expensive. So in SMC:

• In an uptrend, watch for buying when price comes down into discount.
• In a downtrend, watch for selling when price comes up into premium.

Real Bitcoin 4-hour candles (November–December 2025; times are Korea time, like the chart axis). Swing structure was down after a BOS ↓ at 01:00 on Nov 14. The range runs from the high of 107,500 USDT at 09:00 on Nov 11 (strong high) to the low of 80,600 USDT at 21:00 on Nov 21 (weak low); equilibrium is the middle, 94,050 USDT.

After the low, price bounced but stalled at equilibrium three times: highs of 94,150 USDT at 05:00 on Dec 4, 94,588.99 USDT at 01:00 on Dec 10 and 94,476 USDT at 05:00 on Dec 11. Only wicks poked just above the line — from Nov 22 on, no 4-hour candle closed above 94,050 USDT. The 05:00 close on Dec 16 was 86,432.08 USDT, about 22% up from the bottom of the range.

An analogy

Think of haggling at a market. The seller wants to sell above the “list price”; the buyer wants to buy below it.

• Equilibrium is the list price — fair to both sides.
• Premium is paying extra; discount is getting a markdown.
• Even in a rising season (uptrend) the person who buys on markdown does better, and in a falling season (downtrend) the one who sells at a markup does better.

In practice

Pair it with the trend

Premium and discount are not used alone. First decide the trend with swing structure, then look only at the side that fits it.

4-hour candles (February–March 2026). A CHoCH ↑ at 17:00 on Mar 4 and a BOS ↑ at 05:00 on Mar 17 put swing structure in an uptrend. The range runs from the low of 65,618.49 USDT at 05:00 on Mar 9 (strong low) to the high of 76,000 USDT at 09:00 on Mar 17 (weak high); equilibrium is about 70,809 USDT.

The 13:00 close on Mar 19 (70,191.17 USDT) dropped below equilibrium, and the 05:00 close on Mar 22 was 68,918.12 USDT — about 32% up from the bottom, on the discount side. In an uptrend, that is the side SMC users watch.

1. Decide the trend with swing structure (up, on this chart).
2. Draw the range and its equilibrium.
3. When price enters the side that fits the trend (discount, in an uptrend), look for other signals there too — order blocks, FVGs, an internal CHoCH.

Going deeper

Cheap does not mean it stops

After that uptrend chart, price fell to a low of 65,000 USDT at 05:00 on Mar 30, past the bottom of the range (65,618.49 USDT). Then the range changes — on a later chart it is redrawn as 65,000–76,000 USDT with equilibrium at 70,500 USDT. Discount is a location — “the cheap side of this range” — not a promise that price will stop there.

Equilibrium is the 50% retracement

Equilibrium is exactly 50% of the range — the same level as the 0.5 Fibonacci retracement, so people using either tool end up watching the same line. The downtrend chart above, where the bounce stalled near this line three times, can be read that way.

Combining with other tools

• When equal lows on the discount side (part 5, EQL) are swept and price comes back, the two signals point the same way.
• ICT-style traders sometimes call the 62–79% retracement of a range the OTE (optimal trade entry). Our chart does not draw it.
• Each timeframe has its own range. A 4-hour chart can be in premium while the daily is in discount — look at the higher timeframe’s range first.

On our chart

How to turn it on

Chart tab › SMC button › Add-ons › tick Premium · Discount zones. Structure (“Swing” or “Swing + internal”) must be on for it to draw — with structure off the ticks are greyed out and nothing is drawn, but your choice is kept. It starts off (the add-ons on at first are FVG and order blocks).

Facts about our implementation

• The top of the range is the highest high since the last swing high (the 50-candle rule), the bottom the lowest low since the last swing low — the same values as the chart’s strong/weak high and low. Internal structure is not used, so “Swing” and “Swing + internal” give the same range.
• When price goes past an end and makes a new high (low), the range widens as soon as that candle closes — only the current range is drawn, old ones are not kept.
• It is drawn only when both ends exist and the top is above the bottom.
• Equilibrium is the exact middle (50%) of the two ends, drawn as a solid line in the secondary colour, labelled “Equilibrium”.
• The bands are the top 5% of the range in red (“Premium zone”) and the bottom 5% in green (“Discount zone”), lightly filled under the candles. In concept the whole half above equilibrium is premium, but the chart shades only the outer 5%.
• The bands and equilibrium start at the earlier of the two ends and run to the right edge of the chart.
• The candle still forming is left out, and only the candles the chart received (500 from Binance) are counted.

Next: part 7, previous day and week highs and lows.